Using cash can cary risk and reward
Before I chose to begin using the Envelope System to manage my bills I had to weigh the risk verses reward. Lets take a look at some risks and some rewards now.
I just made this list up from either what I have heard on the radio or from my personal experience and some combination of the two. One woman told Dave Ramsey that she was afraid she would be robbed if she was carrying around cash. To which Dave replied that robbers do not have X-Ray vision.
The biggest threat to my money is me
I'm not afraid of any bad-guys taking my money. If I'm going to be robbed then there is very little difference to me if they take a credit card or cash. A robbery is a dramatic experience in and of itself. The money can be replaced. It may even make the robbery go better by telling the robber there is an exact amount of cash in the envelope.
Based on last weeks experience I am now completely terrified of loosing the envelope system and the cash inside. I am a PILER and not a FILER. So I tend to leave things around me in piles where I can come back to them later. After paying my cable bill I tossed my envelope system into the glove box and forgot about it for three days.
Rent is due and I don't have the money
On payday I began writing out the withdrawal and deposit slips that I use to put the money into my landlords account. I then began looking for the $300 that was in my envelope system. I couldn't find my envelope system and I was freaking out for no less then the next 45 minutes.
I had not been robbed but I also did't have the money for rent until I could locate my envelope system. I retraced my steps. I tossed the house up in the air and looked underneath every nook and cranny, I even called the boss at work to see if it had been turned in there. Then I made my morning coffee and took a few deep breaths.
Crisis adverted but the risk remains
I am now a lot more conscience about managing where I will put my envelope system. I'm not going to go into detail. In general I now take great care to return my envelope system to the exact same location each and every time that it is used.
After my coffee I went and sat in my car and opened the glove box. With much relief to my sanity I had found my rent money. I took a few more deep breaths and tried to rewire my brain to prevent me from leaving my envelope system lying around.
Risks of using the envelope system
Silly: Yes, the envelope system may make you look silly. I am a grow man who eats bacon. I also write memos when money enters and leaves the envelope. Do you know what will help you overcome feeling silly? Having money. Managing your money will make you feel powerful.
Loss: Could you loose your money. Yes I think I explained how I grew a healthy fear of this happening to my. Loosing my envelope system and all the cash inside created new habits. I embraced the fear of loss and I don't think it will happen again.
Robbery: My fear of robbery is pretty low. It will become even lower when my permit to carry a concealed firearm arrives next month. Robberies have trended toward non-violent. You may be robbed but at least you don't have to call your credit card company and file fraud claims for the next month.
Overspending: Budgeting and using the envelope system has actually helped me to spend exactly what I plan to spend. No more, no less than is in the budget. If you fail to follow your budget then it is not because of your envelope system. You have other problems that must be faced head on.
Limited acceptance: I have experienced no problems finding places that accept cash. I have had to adapt to avoid fees to use cash when paying bills. Walmart may assess a fee to accept the payment for the energy company. I just drive directly to the energy company and they gladly accept my cash with no additional service charge.
Loss: Could you loose your money. Yes I think I explained how I grew a healthy fear of this happening to my. Loosing my envelope system and all the cash inside created new habits. I embraced the fear of loss and I don't think it will happen again.
Robbery: My fear of robbery is pretty low. It will become even lower when my permit to carry a concealed firearm arrives next month. Robberies have trended toward non-violent. You may be robbed but at least you don't have to call your credit card company and file fraud claims for the next month.
Overspending: Budgeting and using the envelope system has actually helped me to spend exactly what I plan to spend. No more, no less than is in the budget. If you fail to follow your budget then it is not because of your envelope system. You have other problems that must be faced head on.
Limited acceptance: I have experienced no problems finding places that accept cash. I have had to adapt to avoid fees to use cash when paying bills. Walmart may assess a fee to accept the payment for the energy company. I just drive directly to the energy company and they gladly accept my cash with no additional service charge.
Rewards of using the envelope system
Visceral: The definition of visceral is - relating to deep inward feelings rather than to the intellect. When I pay with cash I feel a deep connection to the loss of my money. It goes a lot deeper than just doing the math after swiping a debit card. It's an emotional loss and it helps me spend less money which helps me keep more of my money.
Accurate: If I want to know how much money I have I can open my envelope system and count my money. When I spend money it leaves the envelope and is gone. Try tracking your money with a credit card, you can't. With a credit card you are tracking your debt. Cash is accurate, always.
Convenient: When asked for payment I simply present enough cash to cover the expense. I usually only present cash after verifying that it is in the budget. If I present more cash than is required then I am given change. It simple, like how our grandparents did things when they were growing up. It just works.
Measurable: There is no simpler way to track your money then in the envelope system. Add an appropriate amount to each category. When rent is due, if you did your math right, the money will be there.
Increases savings rate: Savings rate is the leading factor in building wealth. You don't get rich by the interest rate in your savings account or cash back rewards on a credit card. Having money and adding that money to your savings is how you will build wealth. I have found that getting out of debt and using my envelope system has allowed me to increase my savings rate.
Accurate: If I want to know how much money I have I can open my envelope system and count my money. When I spend money it leaves the envelope and is gone. Try tracking your money with a credit card, you can't. With a credit card you are tracking your debt. Cash is accurate, always.
Convenient: When asked for payment I simply present enough cash to cover the expense. I usually only present cash after verifying that it is in the budget. If I present more cash than is required then I am given change. It simple, like how our grandparents did things when they were growing up. It just works.
Measurable: There is no simpler way to track your money then in the envelope system. Add an appropriate amount to each category. When rent is due, if you did your math right, the money will be there.
Increases savings rate: Savings rate is the leading factor in building wealth. You don't get rich by the interest rate in your savings account or cash back rewards on a credit card. Having money and adding that money to your savings is how you will build wealth. I have found that getting out of debt and using my envelope system has allowed me to increase my savings rate.
What I learned about cash
I have shared a few stories related to my use of the envelope system. When I began I was paralyzed by spending cash. I had to relearn what cash was and how to use it on a daily basis. Read my past posts about the Envelope System to get all caught up.
If you think you are ready to for the intense visceral connection to your money that will come with using Dave Ramsey's envelope system then I encourage you to get one of your own. I am providing a link to the envelope system similar to the one that I use. The Deluxe Executive Envelope System includes everything you need to get started, except the cash. Using my store link is no additional cost to you but it does provide me with a small commission on the sale.
